Success of RealPage and Zillow show some real estate IPOs have been great bets

Steven Loeb · July 26, 2018 · Short URL: https://vator.tv/n/4bda

A bunch of companies have gone public, only to be acquired a few years later

Venture investing into the real estate space took a major upswing in 2017, with $12.6 billion invested, tripling the $4.2 billion from 2016. That was due to mega deals, including the $4.4 billion raised by WeWork from SoftBank, as well as a $550 million investment in Compass, the majority of which also came from SoftBank.

The space is so hot right now that there are multiple venture firms that are solely focused on real estate that just raised two: in June, JLL Spark raised a $100 million fund to invest in real estate technology, followed by Fifth Wall Ventures, which raised $100.8 million for its second fund, according to a filing with the Securities and Exchange Commission. The firm is targeting a total of $400 million for the fund.

The true sign of a maturing space, though, is when companies start to go public, and we've already seen that start to happen with what some would call "real estate 2.0" companies, those that have come into existence in the last 10 to 15 years, such as Zillow and Redfin.

Real estate technology, however, has had a bit of a spotty history on the stock market. In the last 20 years there have been three high profile companies that went public, only to have their listings removed when they were repurchased. That includes Move.com, which went public in 1999, only to then be purchased by iPlace for $150 million in August 2001, and LoopNet, which went public in 2006 before being bought by CoStar for $860 million in 2011.

The most recent exampel was Trulia, which went public in 2012, before being bought by Zillow for a whopping $3.5 billion in 2014.

Interestingly, in two of those cases, the acquirer was another publicly traded real estate tech company. So it's not that these companies can't succeed on the public market, but more that only a handful have been able to.

Here's the real estate tech companies that are still on the publicly traded markets are faring right now:

IPO price: $15 (7/27/2017)
Price at the start of the year: $31.41
Current price: $25.37
Percentage change for the year: down 19.22 percent
Percentage change from IPO: Up 69.13 percent
Market cap: 2.11 billion
2017 revenue: $370 million

Image result for zillow

IPO price: $20 (7/20/2011)
Price at the start of the year: $40.50
Current price: $62.69
Percentage change for the year: Up 54.7 percent
Percentage change from IPO: Up 213.5 percent
Market cap: 8.27 billion
2017 revenue: $1.1 billion

Image result for costar

IPO price: $9 (7/1/1998)
Price at the start of the year: $298.29
Current price: $432
Percentage change for the year: Up 44.9
Percentage change from IPO: Up 4,700 percent
Market cap: 16.18 billion
2017 revenue: $1.8 billion

Image result for realpage

IPO price: $11 (8/12/2010)
Price at the start of the year: $44.35
Current price: $59.15
Percentage change for the year: Up 33.4 percent
Percentage change from IPO: Up 437.7 percent
Market cap: 5.53 billion
2017 revenue: $671 million

Who could be next?

So which companies could be the next ones to go public?

The most obvious answer to that question is Airbnb, which has been one of the most anticipated IPOs for years. The company, which has raised $4.4 billion, is valued at $31 billion. According to Pitchbook, if it were to IPO now, it would be the second largest of the last decade, assuming Uber doesn't go public first.

The other obvious candidate for a public market debut is WeWork, which has raised even more money than Airbnb, with $8.6 billion, but with a smaller valuation of $20 billion.

There are two more real estate tech companies that could go public, though they are not quite as high profile as Airbnb and WeWork. The first is Compass, which has raised $808 million, including a $450 million round in December that valued it at $1.8 billion. The second is Opendoor, which has raised $645 million, most recently a $325 million round in June, giving it a $2 billion valuation.

(Image source: triplemint.com)

Steven Loeb

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Redfin is the industry's first online brokerage for residential real estate. We believe that technology and a consumer-centered business model mean that we can get better results for our customers, at a completely different price.
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Customers search for homes on our website, arrange home tours with Redfin and, when they've found a home they like, get started on an offer via our website. For each transaction, the same Redfin real estate agent handles the negotiations, contingencies and paperwork. The average customer saves more than $10,000 in commissions.
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Customers use our website to tell us they'd like to sell a home, and then begin working with their Redfin team to get the home ready to sell and set the price. Once an offer comes in, Redfin negotiates on behalf of the customer and makes sure all the paperwork is taken care of. The average customer saves more than $10,000 in commissions.
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Our service is half on the Internet, half personal. Redfin's technology combines listings with objective data, including maps, property outlines, third-party appraisals and tax records. We base our service on data-driven best practices for buying and selling a home. Our business model focuses our personnel on customer service. We employ agents directly, and we compensate agents based on customer satisfaction. We believe this approach is not only more efficient, but leads to better service.

Our core value is consumer-driven innovation. We were the first to launch a map-driven search application in 2004, and the first to offer an online home-buying service in 2006. By January of 2008, we had refunded more than $10 million in commissions to home-buyers. According to MLS records, we were also able to negotiate a lower price for our customers than other brokerages could. We offer a 100% satisfaction guarantee.

Redfin earns fees from buyers or sellers that we represent in a real estate transaction. In Seattle, we have begun an experimental program to provide a mortgage service, charging a flat fee to act as a mortgage broker. These are the only ways today that we generate revenue.
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